Economic Volatility and Inequality: Do Aid and Remittances Matter?

The study of 142 countries, 1973-2012, finds that macroeconomic volatility widens income equality with the poorest most exposed

From:: Foreign, Commonwealth & Development Office
Published: 1 July 2016

Document Type:: Briefing
Theme:: Economic Growth
Authors:: Chauvet, L, Ferry, M, Guillaumont, P

Abstract

The authors examine the adverse impact of macroeconomic volatility on inequality and the role that aid and remittances could play in mitigating this effect. Using a panel of 142 countries over 1973-2012, they find that macroeconomic volatility widens income equality with the poorest being most exposed. However, while aid and remittances do not seem to have a direct impact on inequality, they both find evidence that aid helps to mitigate the negative effects of volatility on income distribution and has a stabilizing impact on income while remittances do not.

This work is part of the ‘Financial Volatility, Macroprudential Regulation and Economic Growth in Low-Income Countries’ project

Citation

Chauvet, L., Ferry, M., Guillaumont, P., Guillaumont Jeanneney, S., Tapsoba, S. J.-A. Wagner, L. (2016) Economic Volatility and Inequality: Do Aid and Remittances Matter? FERDI Briefing Note, July 2016